Canada's Top Six Banks to Get Capital Surcharge as of 2016

Canada's banking watchdog said
on Tuesday it sees the country's six largest banks as being of
systemic importance to the domestic economy and that it will
make them keep 1 percent more capital on hand starting January
2016 to protect them from financial disruption.

Canada's banking watchdog said
on Tuesday it sees the country's six largest banks as being of
systemic importance to the domestic economy and that it will
make them keep 1 percent more capital on hand starting January
2016 to protect them from financial disruption.

The Office of the Superintendent of Financial Institutions
(OSFI) said the six banks are so big and complex that their
failure would damage the Canadian economy. The banks are: Bank
of Montreal, Bank of Nova Scotia, Canadian
Imperial Bank of Commerce, National Bank of Canada
, Royal Bank of Canada and Toronto-Dominion Bank
.

The OSFI statement expanded on an announcement in the March
21 federal budget that said some banks would face higher capital
requirements.

The changes are in line with the focus the Group of 20 rich
and developing nations is putting on banks that play significant
roles in their home countries.

This recent attention on the so-called D-SIBs, or
domestically important banks, is a new step following a G20
agreement after the 2008 global financial crisis to impose
additional capital requirements on banks deemed systemically
important at the global level.

"The measures we are announcing today are designed to limit
the likelihood that a major bank would encounter distress or
failure that could negatively impact the Canadian economy or
taxpayers," Julie Dickson, the head of OSFI, said in a
statement.

The Basel Committee on Banking Supervision released a
framework in October 2012 to define the D-SIBs, but gave
domestic regulators some leeway in classifying the institutions.

OSFI said the five largest Canadian banks, excluding
National Bank Financial, account for more than 80 percent of
total banking assets, and the six largest comprise almost 90
percent.